Special Market Situations - Catana Group
An interesting French small-cap, seemingly unnoticed by the market.
This analysis is part of a review that we are conducting at MORAM Capital of 8 companies for which we have published some Long/Short analysis in the past two years and which have undergone significant changes in recent months. The goal is to determine which of these 8 companies are worth having some form of exposure (Long/Short) or through derivatives, and which ones are better to avoid.
The sole purpose is educational—to replicate the process we carry out in investment funds—and it should never be considered an investment recommendation.
Over the past three years, one of the industries we have dedicated the most time to is the European yacht industry (complemented by coverage of American boat manufacturers – although they target a different type of customer). The thesis, models, and continuous updates of all the listed companies in the market are available on our website: The Italian Sea Group, Sanlorenzo, Ferretti, Fountaine Pajot, Bénéteau.
Introduction
Catana Group is a family-owned company specializing in the construction of catamarans and operating a marina on the French Riviera (Saint Mandrier). Since going public in 2014, this small-cap company, with a market capitalization of €150 million, is 30% owned by the Poncin family, who hold 44% of the voting rights.
Catana is the second-largest catamaran manufacturer globally and offers three distinct product lines:
Catana: The original and current premium line with average prices around €2 million. Delivery timelines are approximately 1.5 years from order, with a payment structure involving three to four installments, starting with a deposit before production begins. This process is similar to those used by TISG and SL.
Bali: Launched in 2014, this sailing catamaran line has been a significant factor in Catana's recent success, growing from 15 units sold annually to 305 last year. Delivery times are 5-6 months, with an average boat price of €0.6 million. The payment structure for Bali is simpler, requiring a 10% reservation fee with the balance due upon delivery, targeting a broader market.
YOT: A new line of power catamarans presented in 2023, to be produced in a new production plant in Portugal which opens by the end of this 2024. The initial focus is on Europe, with a planned U.S. launch for a later phase. YOT currently offers three models between 11 and 15 meters, with an average price of €0.5 million. The brand's success has enabled orders to be processed at existing factories, expediting the development of a distribution network.
Each line targets different market segments, with Catana primarily appealing to high-net-worth individuals (HNWIs) rather than ultra-high-net-worth individuals (UHNWIs) like Italian superyacht companies. Consequently, Catana is considered more cyclical due to its clientele and the time required to produce boats, leading to a backlog that can extend over a year.
This distinction is crucial as the economics and impact of economic cycles vary significantly among luxury boat companies. For those unfamiliar with the sector, this provides a basic overview, with more detailed information available in next week's special report (Yatch & Superyacht industry).
Focusing on Catana's peers, we present a chart showing the evolution of revenues over the last five years of its group of peers, where we can see that the success of the Bali brand has truly marked a turning point for Catana and has allowed it to significantly differentiate itself from its peers.
Moreover, although we will delve into the numbers in more detail later, Catana's EBITDA margin (17%) is higher than that of its competitors.
Despite the cyclicality aspect we commented before, something to keep in mind about Catana is that its main clients are charter boat companies and not directly retail. It helps to explain why it is growing sales this year and other competitors are tanking., In fact, 80% of Catana's customers are charter companies (the interesting point is that these charter companies need to renew their fleet every 5-6 years on an ongoing basis). France, Turkey, and the USA are its three main markets (16%, 15%, and 14% of its sales, respectively).
Another relevant aspect to introduce Catana is its specialization in catamarans, which is a niche industry with very few specialized players. Most manufacturers, like Beneteau/Lagoon, Fountaine Pajot, Leopard, and Outremer, diversify their production. Catana is the only pure player.
Within the growth of the yacht industry over the last decade, catamarans have particularly outpaced monohulls. This trend has stabilized within the industry due to the advantages catamarans offer over their counterparts, such as greater stability, speed, and living space. It is estimated that catamarans will continue growing at a CAGR close to 6% (depending on the study) until 2030 (with fairly equal growth between sailing catamarans and motor catamarans, the segment in which Catana is now entering with the launch of its YOT brand).
To achieve this, the company operates four production sites: Canet-en-Roussillon in the South of France, the company’s historic headquarters; Marans, located near La Rochelle on the Atlantic coast, El Haouaria, situated in Cap Bon, Tunisia (50% ownership) and the newest one in Aveiro (Portugal)